Online games look for gains from recession
As the economic slowdown ripples around the world, Asian online game companies are hoping that more people - many of them newly jobless, with time on their hands - will seek cheap entertainment and drive a long-sought expansion into Western markets.
Online games that allow thousands of players to compete simultaneously over the Internet are a dominant form of video gaming in China, South Korea and other parts of Asia. Blockbusters like "World of Warcraft" by Blizzard Entertainment, a unit of Vivendi of France, and the "Lineage" series from NCSoft of South Korea have attracted millions of users.
Analysts estimate the online game market to be about one-fifth of the size of the video console game market. Total PC gaming revenue is expected to reach $19 billion by 2013, according to research by DFC Intelligence.
Extensive broadband access and a gaming culture built around cybercafés helped online games prosper in Asia. But that success has not been duplicated in North America and Europe, largely because of lower broadband penetration and cultural differences.
Now, developers and publishers say, the spreading economic downturn could do what years of marketing couldn't.
"During economic downturns, people will look for the highest return on their entertainment dollar," said Lan Hoang, chief executive of Aeria Games & Entertainment, a Silicon Valley company that publishes online games, primarily those developed in Asia, for the U.S. and European markets. "Online games provide an immersive virtual world for people to escape the daily struggles."
Many online game programs are offered free, generating revenue from fees players pay for such options as enhancing their characters. In other cases, players pay by the month.
Analysts say the online game industry is not only recession-proof but can even benefit from an economic slump, as people stay home more often and have more time on their hands.
Typically, a player can spend months on a multiplayer online role-playing game as their character - a warrior or a sorcerer, for instance - builds skills and takes on adversaries in a series of missions.
Such commitment makes the online gamer's profile quite different from that of the typical purchaser of a Nintendo Wii console or a DS handheld player - devices that have achieved success with easy-to-play games meant for a broader population.
Michael Pachter, an analyst at Wedbush Morgan, said an economic recession was unlikely to affect the online game industry "because people who play them are addicts."
"Losing their jobs makes them more likely to play because they have more time to play," Pachter said.
In South Korea, online gaming quickly spread to become a social phenomenon earlier this decade in the aftermath of the 1997-98 Asian financial crisis, which left many young men unemployed.
Another factor that may brighten online games' prospects in the West is the rapid growth of broadband, a prerequisite for the service.
Gartner expects U.S. broadband penetration to swell to 77 percent of households by 2012 from 54 percent in 2007. Penetration could jump to around 70 percent from about 50 percent in France, Britain and Spain, Gartner said.
"Internet is a must, while game consoles are just an option," said Shim Jun Bo, an analyst at HI Investment Securities. "If you have Internet access, then why not play some games?"
The recent success of Web communities in the United States, like MySpace, is also encouraging for the industry. Online communities play a critical role in retaining users. In the United States, free gaming sites like Pogo.com as well as subscription games like "World of Warcraft" are already seeing strong traffic, said Colin Sebastian, an analyst at Lazard Capital Markets.
"We think it's a robust growth category in terms of video games and Internet media," he said.
Asian developers are introducing new games with more globally appealing themes and enhanced graphics, targeting a broader user base.
NCSoft plans to introduce an online role-playing game "Aion," which boasts detailed 3-D graphics and took $17 million to develop, in North America and Europe this year. It was introduced in South Korea in November.
Neowiz Games, a South Korean company that is partly owned by the video game giant Electronic Arts, will offer its baseball game "Slugger" in North America after modifying contents to reflect U.S. leagues.
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